Martin v. Lou Poliquin Enterprises, Inc.

• Decision Date: 05 July 1985
• Docket Number: No. A14-84-091-CV,A14-84-091-CV
• Citation: 696 S.W.2d 180
• Parties: Glenn MARTIN, d/b/a The Glenn Martin Agency, Appellant, v. LOU POLIQUIN ENTERPRISES, INC., d/b/a Barbizon School of Modeling, Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 180

696 S.W.2d 180

Glenn MARTIN, d/b/a The Glenn Martin Agency, Appellant, v. LOU POLIQUIN ENTERPRISES, INC., d/b/a Barbizon School of

Modeling, Appellee.

No. A14-84-091-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

July 5, 1985.

Rehearing Denied July 5, 1985.

Joel Bennett of Kendrick, Netter & Bennett, Los Angeles, Cal., and Clarence E. Eriksen of Arnold, White & Durkee, Houston, for appellant.

Eugene J. Pitman and Donald W. Mills of DeLange, Hudspeth, Pitman & Katz, Houston, for appellee.

Before the court en banc.

OPINION ON MOTION FOR REHEARING

DRAUGHN, Justice.

Following the panel opinion previously rendered in this case, both appellant and appellee filed motions for rehearing before the full court. We withdraw the previous panel opinion and substitute the following.

This case presents three major issues. Of primary concern is (1) the definition of the term "consumer" under the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA), ¹ a definition that determines who may initiate a private cause of action under the DTPA. Our review of this first issue regarding consumer status calls into question a panel decision of this court rendered four years ago, wherein this court held that one must transfer valuable consideration to be a consumer under the DTPA. Bancroft v. Southwestern Bell Telephone Co., 616 S.W.2d 335 (Tex.Civ.App.--Houston [14th Dist.] 1981, no writ). Also at issue are (2) whether a party may limit its DTPA liability by contract and (3) whether the evidence is sufficient to support the trial court's award for lost profits.

Lou Poliquin, president of the appellee modeling school, sought to place an advertisement in the 1980 Houston Yellow Pages through the services of The Glenn Martin Agency, a national advertising firm specializing in the placement of such ads. When the ad failed to appear in the Houston directory, Lou Poliquin Enterprises sued Glenn Martin under the DTPA. The trial court awarded Lou Poliquin Enterprises actual damages of $30,000 in lost profits, $5,965 in attorneys' fees, and $2,000 under DTPA § 17.50(b)(1). Glenn Martin presents eleven points of error raising the three issues listed above. We now hold that valuable consideration is not a prerequisite for DTPA consumer status, we overrule our contrary holding in Bancroft, and we affirm the trial court's judgment in favor of Lou Poliquin Enterprises.

Lou Poliquin's modeling school in Houston, Texas, operated as a franchise of Barbizon School of Modeling International of New York City. In September of 1979, Barbizon International informed Mr. Poliquin that The Glenn Martin Agency had been granted the right to solicit contracts for ads from all its franchises. Mr. Poliquin subsequently executed such a contract with Martin's agency for renewal of the Barbizon ad in the 1980 Houston Yellow Pages. When the directory appeared, however, the Barbizon ad was not included.

The parties offer different explanations for this omission. Mr. Poliquin contends Barbizon International notified him in December of 1979 that it had terminated its national contract with Glenn Martin; however, the franchisor indicated that individual franchisees could continue their contracts with the agency for the 1980 ads. Mr. Poliquin elected to continue his contract. However, he became alarmed in January of 1980 when a local sales representative of the Houston Yellow Pages notified him that he had not received a renewal notice for the Barbizon ad. Mr. Poliquin testified that he immediately called The Glenn Martin Agency to determine if there was a problem in placing his ad. An agency sales representative assured Poliquin that his ad would appear and stated that the local Southwestern Bell sales representative would not have been notified of the Barbizon renewal because the agency had placed the ad with a senior Bell employee who handled placements by national agencies. Subsequently, the local Bell representative admitted to Mr. Poliquin that it was possible for the ad to have been placed through a senior Bell employee. In reliance upon The Glenn Martin Agency's assurances, Mr. Poliquin did not place an ad with the local Bell sales representative.

Glenn Martin offers a very different version of the facts. He testified his agency sent Mr. Poliquin a letter in December of 1979 stating that its contract with Barbizon International had been terminated and that Mr. Poliquin should make other arrangements to place the 1980 Barbizon ad. Mr. Poliquin denied having received such a letter.

The agency sales representative responsible for Mr. Poliquin's account specifically denied receiving a call from Mr. Poliquin in January inquiring as to the status of the Barbizon ad. The trial court apparently believed Mr. Poliquin's version of the facts.

CONSUMER STATUS ISSUE

Appellant Glenn Martin alleges in his first two points of error that the Barbizon School of Modeling may not recover under the DTPA because there is no evidence or insufficient evidence that the school is a consumer as required by the act. We disagree. It is well settled that an individual must be a consumer to initiate a private cause of action under DTPA § 17.50(a). ² A consumer is defined in DTPA § 17.45(4) as one "who seeks or acquires by purchase or lease, any goods or services...." However, the critical question confronting us is whether a person who merely seeks to purchase goods or services may be a consumer if he has not actually transferred valuable consideration for the object of his search. The specific answer to this question has to date been clouded with uncertainty. We are now presented squarely with this issue, because in the present case, Mr. Poliquin executed a contract with the advertising agency but had not paid for the services. Relying on earlier case law rationale, Glenn Martin claims the Barbizon School is not a consumer under the DTPA because Mr. Poliquin did not transfer valuable consideration for the services sought.

As primary support for his position, Martin cites Bancroft v. Southwestern Bell Telephone Co., 616 S.W.2d 335 (Tex.Civ.App.--Houston [14th Dist.] 1981, no writ). The facts in Bancroft are remarkably similar to the case at bar, and that opinion states that one must transfer valuable consideration to qualify as a DTPA consumer. Id. at 337. However, Bancroft was decided in 1981. Recent developments in this area of the law indicate that we should re-evaluate our position to determine whether Bancroft 's rationale still applies.

In 1981 the Texas Supreme Court stated that the DTPA must be liberally construed to carry out the legislative intent of consumer protection. Cameron, 618 S.W.2d at 540; DTPA § 17.44. In the years following Cameron, most of the cases interpreting the DTPA definition of "consumer" arose from situations where a payment changed hands at some point in the transaction, although the purchase or lease may not have been entirely consummated. ³ There are very few cases in which no payment occurred at any point, thus placing the issue of the necessity of valuable consideration squarely before an appellate court. Bancroft, 616 S.W.2d at 335; Exxon Corp. v. Dunn, 581 S.W.2d 500 (Tex.Civ.App.--Dallas 1979, no writ). ⁴

The Texas Supreme Court recently indicated that a person's "objective" is of paramount importance in determining DTPA consumer status. La Sara Grain Co. v. First National Bank of Mercedes, 673 S.W.2d 558, 567 (Tex.1984). ⁵ An important Our examination of the statute as a whole supports the conclusion that DTPA consumer status is not dependent upon the transfer of valuable consideration. For example, in § 17.46(b)(10), the statute lists the practice of "advertising goods or services with intent not to supply a reasonable expectable public demand ..." as a deceptive trade practice actionable by a consumer. See DTPA § 17.50(a)(1). Section 17.46(b)(10) was designed to prevent "bait and switch" advertising where the seller attracts customers through the advertisement of inexpensive products the seller intends to sell only in nominal amounts. Customers responding to this advertisement are immediately diverted to more expensive products. See Smith v. Baldwin, 611 S.W.2d 611, 615 (Tex.1980). When a consumer encounters this practice, must he actually buy the more expensive product or at least tender a downpayment on a product he does not want before he may sue the seller for a deceptive trade practice? We think not. Under these circumstances, valuable consideration would not typically change hands. Therefore, to be eligible to bring a DTPA claim based on § 17.46(b)(10), the prospective purchaser must at least have approached the seller with the objective of purchasing the advertised inexpensive product. He must at least have sought in good faith to purchase.

factor in qualifying as a DTPA consumer, then, is whether a person intended to purchase or lease the goods or services in question, or more succinctly, whether that person's objective was to purchase or lease. The La Sara opinion makes no reference to valuable consideration as a requirement for consumer status. Although the necessity of valuable consideration was not squarely before the supreme court under the circumstances of that case, we believe La Sara illustrates to some degree the current trend of the supreme court's reasoning with respect to this issue.

In reviewing the § 17.46(b) laundry list of deceptive practices, we can conceive of numerous situations wherein an individual would execute a purchase contract but would not actually follow through with payment because of the subsequent discovery of a deceptive trade practice. This individual could suffer substantial damages in justifiable reliance upon the contract he had executed in good faith with the seller. We believe the DTPA was designed to protect consumers confronted with precisely this type of problem. If that consumer can prove his damages with reasonable certainty, he may recover pursuant to the...